Developer gets six more months to study feasibility of downtown hotel

Published: Wednesday, September 4, 2013 at 4:58 p.m.

Last Modified: Wednesday, September 4, 2013 at 4:58 p.m.

OCALA -- Over the objections of hotelier Danny Gaekwad, the Ocala City Council on Tuesday voted unanimously to give developer Broadway & First of Ocala, LLC, an additional six months to determine if it is feasible to build a boutique hotel downtown.

Gaekwad, who owns three hotels in Ocala, asked the council if it would open up the bidding to others.

"We live in Ocala. We pay you taxes every year on time. We build hotels with our own money," Gaekwad said. "Why not extend the same bid to everybody else and see what the city can get better out of it?"

The City Council in March agreed to give Broadway & First, also known as Ocala Development, which is owned by Albert Peek, a six-month exclusive period to examine the feasibility of building a hotel on the former Chamber of Commerce site east of the downtown square. In August, just before the six months was due to expire, the developer asked the council during a workshop meeting if it might consider extending the exclusive period an additional six months, to March 19, 2014. Council members seemed agreeable to the extension, but the matter had to be presented for a vote in a formal council meeting, which occurred Tuesday.

Gaekwad told council members that numerous hotels in town have gone bankrupt, changed hands or closed. He said hotel occupancy rates are down, pointing to declining tourist development tax revenues. Guests who stay six months or less at hotels, motels, campgrounds and RV parks pay the 2 percent tax. In 2006-07 the tax generated $1.12 million. In fiscal year 2011-12 it fell to $863,071 and is projected to fall this year to $885,444.

"Hotels are barely making it," Gaekwad said.

Mayor Kent Guinn said there have been numerous bids for the downtown property. Based on the declining revenues Gaekwad presented, Guinn questioned whether Gaekwad would have bid had it been open to everyone. Guinn said this was not the city's project, it was the developer's project and the developer came to the city with the request to explore the feasibility of a downtown hotel. He said the developer is making an investment and "has skin in the game."

According to the city's attorney, the city does not have to open the bid.

Gaekwad said if the city agrees to build a convention center and provide a parking garage to serve the hotel, the developer has an unfair advantage over other hotel owners. He said when he built his Holiday Inn off State Road 200, he had to pay $712,000 in transportation impact fees — fees the county has since suspended.

"Right now, that advantage is a great advantage," Gaekwad said. "That's a $700,000 saving the first day."

Asked why he would be interested in bidding if business is bad, Gaekwad said he would not have been interested in 2008, but, with an additional six months to do a feasibility study, coupled with the time it would take to build the hotel, which likely could open in January, 2017, the market likely will have turned and may be worth considering.

Council President Mary Rich said the city gave its word to the developer.

"Our word is our bond," Rich said.

Gaekwad said the city promised the developer six months.

Councilwoman Suzy Heinbockel, who had concerns about not allowing other people a chance at developing a project, asked if the city ever asked for a bid for a hotel.

Marc Mondell, the city's executive director of community development, said the city, in the past, had put out requests for proposals with an emphasis on mixed use retail and residential. The city worked unsuccessfully for years to develop downtown projects with developers Jorge Gutman and White Challis. He said the city did not specify a hotel in those requests, but a hotel would have been accepted.

"I am open to the idea of opening it up a little bit," Heinbockel said about the bidding. "We have kept our word. Now we are making the decision to make another promise or not."

Councilman Daniel Owen asked if the city had any financial obligations under the agreement being considered. He also asked about the parking garage.

Assistant City Attorney W. James Gooding III, who has represented the developer in other matters but is representing the city regarding this proposal, said the city would be giving the developer an additional six months but was not obligated financially to anything other than staff time. Gooding added, however, that the developer is not interested in the project unless the city provides parking.

Clark Yandle of the North Magnolia Merchants' Association said he wants to support the hotel project and would not take a position regarding its location, but expressed concern about a parking garage and whether Community Redevelopment Area money that is needed for North Magnolia projects would be diverted toward a garage.

Gaekwad questioned the city's involvement in, perhaps, providing parking and a convention center, and how that would give the developer an unfair advantage.

"When I built my hotels in Ocala, I didn't come to the city for anything," Gaekwad said. "What is the reason we are building this hotel? Who is paying for it? Is the taxpayer on the hook or not?"

Fred Roberts, an attorney for the developer, said the developer has spent a substantial amount of money on the feasibility study to make a long-term investment in the community. He said it is a "reasonable step" to want to continue to work toward a developers' agreement with the city and negotiate in good faith. He said the feasibility study has been presented to city staff.

"We kept saying we wanted a local developer with local money," Guinn said. "All this work we are doing downtown is for naught if we don't do a project on this site."

Guinn said the developer has experience and that people with hotel experience are involved.

"The extension is warranted," Councilman John McLeod said.

Councilman Jay Musleh agreed.

"These projects typically take longer than six months to put together," Musleh said. "We are not committing one dime of city money tonight."

The council also voted to give developer Sandy McBride a 90-day extension to evaluate converting the former Sprint building north of City Hall into condominiums.

<p>OCALA -- Over the objections of hotelier Danny Gaekwad, the Ocala City Council on Tuesday voted unanimously to give developer Broadway & First of Ocala, LLC, an additional six months to determine if it is feasible to build a boutique hotel downtown.</p><p>Gaekwad, who owns three hotels in Ocala, asked the council if it would open up the bidding to others.</p><p>"We live in Ocala. We pay you taxes every year on time. We build hotels with our own money," Gaekwad said. "Why not extend the same bid to everybody else and see what the city can get better out of it?"</p><p>The City Council in March agreed to give Broadway & First, also known as Ocala Development, which is owned by Albert Peek, a six-month exclusive period to examine the feasibility of building a hotel on the former Chamber of Commerce site east of the downtown square. In August, just before the six months was due to expire, the developer asked the council during a workshop meeting if it might consider extending the exclusive period an additional six months, to March 19, 2014. Council members seemed agreeable to the extension, but the matter had to be presented for a vote in a formal council meeting, which occurred Tuesday.</p><p>Gaekwad told council members that numerous hotels in town have gone bankrupt, changed hands or closed. He said hotel occupancy rates are down, pointing to declining tourist development tax revenues. Guests who stay six months or less at hotels, motels, campgrounds and RV parks pay the 2 percent tax. In 2006-07 the tax generated $1.12 million. In fiscal year 2011-12 it fell to $863,071 and is projected to fall this year to $885,444.</p><p>"Hotels are barely making it," Gaekwad said.</p><p>Mayor Kent Guinn said there have been numerous bids for the downtown property. Based on the declining revenues Gaekwad presented, Guinn questioned whether Gaekwad would have bid had it been open to everyone. Guinn said this was not the city's project, it was the developer's project and the developer came to the city with the request to explore the feasibility of a downtown hotel. He said the developer is making an investment and "has skin in the game."</p><p>According to the city's attorney, the city does not have to open the bid.</p><p>Gaekwad said if the city agrees to build a convention center and provide a parking garage to serve the hotel, the developer has an unfair advantage over other hotel owners. He said when he built his Holiday Inn off State Road 200, he had to pay $712,000 in transportation impact fees — fees the county has since suspended.</p><p>"Right now, that advantage is a great advantage," Gaekwad said. "That's a $700,000 saving the first day."</p><p>Asked why he would be interested in bidding if business is bad, Gaekwad said he would not have been interested in 2008, but, with an additional six months to do a feasibility study, coupled with the time it would take to build the hotel, which likely could open in January, 2017, the market likely will have turned and may be worth considering.</p><p>Council President Mary Rich said the city gave its word to the developer.</p><p>"Our word is our bond," Rich said.</p><p>Gaekwad said the city promised the developer six months.</p><p>Councilwoman Suzy Heinbockel, who had concerns about not allowing other people a chance at developing a project, asked if the city ever asked for a bid for a hotel.</p><p>Marc Mondell, the city's executive director of community development, said the city, in the past, had put out requests for proposals with an emphasis on mixed use retail and residential. The city worked unsuccessfully for years to develop downtown projects with developers Jorge Gutman and White Challis. He said the city did not specify a hotel in those requests, but a hotel would have been accepted.</p><p>"I am open to the idea of opening it up a little bit," Heinbockel said about the bidding. "We have kept our word. Now we are making the decision to make another promise or not."</p><p>Councilman Daniel Owen asked if the city had any financial obligations under the agreement being considered. He also asked about the parking garage.</p><p>Assistant City Attorney W. James Gooding III, who has represented the developer in other matters but is representing the city regarding this proposal, said the city would be giving the developer an additional six months but was not obligated financially to anything other than staff time. Gooding added, however, that the developer is not interested in the project unless the city provides parking.</p><p>Clark Yandle of the North Magnolia Merchants' Association said he wants to support the hotel project and would not take a position regarding its location, but expressed concern about a parking garage and whether Community Redevelopment Area money that is needed for North Magnolia projects would be diverted toward a garage.</p><p>Gaekwad questioned the city's involvement in, perhaps, providing parking and a convention center, and how that would give the developer an unfair advantage.</p><p>"When I built my hotels in Ocala, I didn't come to the city for anything," Gaekwad said. "What is the reason we are building this hotel? Who is paying for it? Is the taxpayer on the hook or not?"</p><p>Fred Roberts, an attorney for the developer, said the developer has spent a substantial amount of money on the feasibility study to make a long-term investment in the community. He said it is a "reasonable step" to want to continue to work toward a developers' agreement with the city and negotiate in good faith. He said the feasibility study has been presented to city staff.</p><p>"We kept saying we wanted a local developer with local money," Guinn said. "All this work we are doing downtown is for naught if we don't do a project on this site."</p><p>Guinn said the developer has experience and that people with hotel experience are involved.</p><p>"The extension is warranted," Councilman John McLeod said.</p><p>Councilman Jay Musleh agreed.</p><p>"These projects typically take longer than six months to put together," Musleh said. "We are not committing one dime of city money tonight."</p><p>The council also voted to give developer Sandy McBride a 90-day extension to evaluate converting the former Sprint building north of City Hall into condominiums.</p><p>Contact Susan Latham Carr at 867-4156 or susan.carr@starbanner.com.</p>